Acquisition of shares, investment: SBP amends R-6 of PRs for commercial banking

KARACHI: The State Bank of Pakistan (SBP) has made some amendments to the Regulation R-6 of Prudential Regulations for Corporate and Commercial Banking for investment in the companies.

According to a circular issued to bank and DFIs, it has decided to revise Para 1-A of Regulation R-6 of Prudential Regulations for Corporate/Commercial Banking for the acquisition of Shares or Single Company Investment Limit.

As per the amendment, the investment of banks and DFIs, in aggregate, in shares of any single company will be lower than 5 percent of Tier-I Capital of the bank and DFI reported in preceding half-yearly reviewed/annual audited financial statements; or, 10 percent of paid-up shares of Investee Company.

These limits will also be applicable to the investment of banks and DFIs in units of all types of mutual funds.

In addition, the investment of banks and DFIs, in aggregate, in shares or units of any single startup including Fintech Startups will be lower than the 5 percent of Tier-I Capital of the bank and DFI reported in preceding half-yearly reviewed or annual audited financial statements or Rs. 500 million.

While, the investment of banks and DFIs, in aggregate, in shares or units of any single Real Estate Investment Trust (REIT) will be lower than 5 percent of Tier-I Capital of the bank and DFI reported in preceding half-yearly reviewed or annual audited financial statements or 15 percent of paid-up shares of Investee Company.

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The SBP has also asked the banks and DFIs for an approved policy incorporating therein an internal evaluation process for objective analysis and assessment of their equity investment decisions, which must consider factors including, inter alia, the financial standing of the bank and DFI, aggregate investment portfolio, risk appetite and expected return, level of expertise, business strategy including exit strategy etc. According to all other instructions on the subject shall, however, remain unchanged.

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